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lecture18full

# lecture18full - Monopoly choice with observed types max F 1...

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Second degree price discrimination 1 With third degree price discrimination, charged people different prices based upon their observed characteristics 2 With second degree price discrimination, monopoly knows that some consumers high demanders and other are not 3 Monopolist then offers different bundles at different prices and individuals ‘reveal’ their type by the bundles they purchase 4 Provides an explanation for why coach seats on airlines are so uncomfortable

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Model Setup Consider a monopolist selling a good with quality given by x
Example: Linear willingness to pay

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Willingness to pay and isoproﬁt lines

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Unformatted text preview: Monopoly choice with observed types max F 1 , x 1 , F 2 , x 2 γ ( F 1-cx 1 ) + ( 1-γ )( F 2-cx 2 ) subject to F 1 = θ 1 v ( x 1 ) F 2 = θ 2 v ( x 2 ) Monopoly choice with unobserved types Individual rationality and incentive compatibility constraints Monopoly solution Monopoly solution 2 Midterm 2 Grades Score Grade Range Percent of Students 58+ A’s 35% 42-57 B’s 47% 33-41 C’s 10% < 33 D/F’s 8% Mean was a 52.4 which was 69% of the possible points Question Mean by question Percent of Points 1 5.8 72.4% 2 8.8 67.6% 3 11.7 64.9% 4 18.9 78.6% 5 7.2 55.8%...
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lecture18full - Monopoly choice with observed types max F 1...

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